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What’s Worse Than Credit Card Debt? Student Loans

Last week the Wall Street Journal sent a message that many of you needed to hear about ten years ago. They identified that student loan debt has officially surpassed credit card debt and now totals some $830 billion. It seems like irresponsibility has jumped the track and now resides in the classroom. This is reckless spending in the name of education. I’ve often been accused of not sugarcoating my financial opinions and this will be no different. Here’s why I’m often the most unpopular guy in the room. Buckle up.

Tuition is a product, plain and simple. And just like any other product you have to be responsible with your choices. Do you buy a Mercedes Benz when you can only afford a Hyundai? Do you buy a $1,000,000 home when you can only afford a $150,000 townhouse? Then why in the world would you ever let your 18-year-old kid, who is no longer allowed to get a measly credit card on their own, to walk blindly down the path of financial suicide just to go to an expensive school?

I’m about to give you the tough love your parents didn’t give you. And I realize it might be too late for you, but ignoring this doesn’t stop the cycle.

Here’s the bottom line on this issue: it’s easier NOT to get into this debt than it is to deal with the debt once you’re in it. As of today, you can’t discharge government guaranteed student loans in bankruptcy. That means you WILL pay it back if it takes the rest of your life.

Think About Community College for Your Core

You don’t need to take English 101 and Chemistry 101 at Duke. You can take them at a community college or a state school and then transfer. Your core curriculum doesn’t need to cost you the same as your final two or three years. This is like paying the same amount for preseason NFL tickets as you do for regular season games.

Just like frugal car buyers never buy a new car and always get something that simply solves the “point A to point B” problem, so should you take a frugal approach to a college education. Cheaper doesn’t equate to substandard so don’t swallow that pill. There is absolutely nothing wrong with community college for your core and an in-state state school for your major.

And yes, I know some schools won’t let you transfer those core credits, but many will.

Wake, Stanford, Duke, Come on!

Why won’t you be reasonable with your college choices just like you should be reasonable with every other credit decision? No, you don’t need to go to Wake Forest at $40,000 per year. No, you don’t need to go to Notre Dame at $40,000 per year. No, you don’t need to drive that new BMW. No, you don’t need to run up $20,000 in credit card debt. Is there really a difference? There’s nothing wrong with an in-state state school, with community college for your core. Going to an expensive school isn’t a birthright and parents who sit on their tongues and let their kids head down this “expensive is better” path are 100% to blame.

College Degree, Reality Check!

Parents and advisors need to step up and give their kids, who don’t know any better at 18, a dose of reality about college degrees, which are basically nothing more than an “entry pass” to the bigger job market. You don’t need a fancy five-year degree (and maybe even grad school) that ends up costing you $100,000 in student loans unless there’s real ROI at graduation (law, medicine, nursing …something that pays off and practically guarantees you a job for as long as you want one).

Choose a degree that gets you in the workforce door and be done with it. If you’re still depending on your degree to get a job five years after you graduate then you’re not doing well. Experience is the real selling point eventually. I’m quite certain I’ve never been hired because of my impressive B.S in Criminal Justice from the University of West Georgia.

For The Haters

Save it. I don’t come from money and I didn’t go to an expensive school. I worked summers to help pay for my cheap, in-state tuition. Getting into student loan debt just to go to a more expensive school seemed unreasonable to me and I’m eternally grateful for the brief moment of clarity when my father asked me, “So John, where are you going to school?”

This is why you guys love me…because I’m not afraid to be the least popular guy in the room saying what you need to hear.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and the author of the “credit history” definition on Wikipedia. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has served as a credit expert witness in more than 70 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.